Section 6.26 Warranty of Habitability, Merchantability, Fitness for a Particular Use

• Library: Construction Law 2016 Supp

1. (§6.26) Warranty of Habitability, Merchantability, Fitness for a Particular Use

In 1972, the Supreme Court of Missouri, in Smith v. Old Warson Development Co., 479 S.W.2d 795 (Mo. banc 1972), departed from the strict rule of caveat emptor in the sale of new homes and held that a common law warranty of habitability will be implied in the sale of a new home by a builder-vendor to protect the first purchaser against latent structural defects. In Old Warson the defendant contractor built a new home, which he sold to the plaintiff purchasers for $82,500 under a standard form realtor sale contract stating that the property was accepted by the purchasers in its present condition. Within a few months of the sale, the home’s concrete slab had settled because of what the Court found to be improper compaction of soils, requiring $6,000 to correct and resulting in over $13,000 in diminished value. In finding for the plaintiff purchasers, the Court rejected the common-law doctrine of merger of a sale contract into a deed and recognized the tort concept of breach of implied warranty of habitability when:

· the home was new;

· the home was purchased from the builder-vendor;

· the defect was latent and not capable of discovery by careful inspection; and

· as a result of the defect, the home was not of a reasonable quality and reasonably fit.

The Court further held that fault or negligence of the builder-vendor was not required for recovery under this implied warranty. The Court noted that the purchasers’ rights arose as a matter of law from their purchase of the house, not from the sale contract or from the deed. The Court explained that the purchase of a residence is, in most cases, the purchase of a manufactured product, a house, deserving of as much protection as a manufactured consumer good. In fact, it is clear from subsequent decisions that the warranty of habitability recognized in Old Warson, which was variously referred to by that Court as a...